Why I value Profit over Growth

I’m swimming in a pool of Growth oriented competitors. Because they have been promising huge market share to their funders, they’re stuck in acquiring shares… at any cost.

Valuing profit over growth is a strategy that can make sense depending on the business model, the industry, the competitive environment, and the stage of the business lifecycle.

Unfortunately, the startup culture is all about grabbing new customers at any cost, sometimes more than 100$ for a new converted user. This is backed by the idea that the customer lifetime value (CLV or CLTV) will be somehow way beyond that cost.

Here are some reasons why a company should prioritize profit over growth:

1. Sustainability: Profitability is a key factor for the sustainability of a business. A business that prioritizes profitability ensures that it can fund its operations, pay its employees, satisfy its creditors, and provide a return to its investors.
2. Financial Stability: A profitable business is typically more financially stable and less reliant on external financing. It can fund its growth through internally generated funds, which can be a lower-cost and lower-risk source of financing compared to external sources like debt or equity.
3. Shareholder Expectations: Investors often expect a return on their investment, which is typically delivered in the form of dividends or share price appreciation driven by earnings growth. A profitable company is more likely to meet these expectations.
4. Business Resilience: Prioritizing profitability can help a business weather economic downturns or other unexpected challenges. A business with a healthy profit margin will typically have more resources to navigate these issues and emerge stronger.
5. Valuation and Exit Strategy: Businesses that are profitable typically have higher valuations, making them more attractive for potential buyers or for public market investors in the event of an IPO. If a business owner’s exit strategy involves selling the business or going public, profitability could be a key consideration.

1. Profitability as a Health Indicator: Profitability is a key indicator of a business’s health. A business that is able to consistently generate profits is likely doing something right — it might have a strong competitive position, a compelling value proposition, effective management, etc. This can build confidence among stakeholders, including employees, customers, suppliers, creditors, and investors.

That being said, there’s also a strong argument for valuing growth over profit in very specific situation: when you’re a Category Breaker, the first in the market you reach. Very few are elligibles, none of them in eCommerce.